Electrical Contractor
This analysis follows the BAM Analysis Framework, evaluating Earnings Quality, Capital Structure Sustainability, Operational Risk Exposure, and Upside Potential.
Deal Snapshot
Industry: Electrical Contractor (Residential & Light Commercial)
Revenue: $1,000,000
Seller’s Discretionary Earnings (SDE): $275,000
Asking Price: $687,500
Multiple: 2.5x SDE
Valuation Analysis
At 2.5x SDE, valuation is attractive relative to service-based businesses with recurring revenue characteristics.
Electrical contracting businesses benefit from repeat service demand, referral-driven growth, and essential service positioning.
However, valuation must account for labor dependency, licensing requirements, and the need to maintain a skilled workforce.
Earnings quality is supported by diversified customer relationships and repeat service work.
SBA Loan Scenario
Purchase Price: $687,500
Buyer Equity (15%): ~$103,000
Loan Amount: ~$584,500
Estimated Annual Debt Service: ~$95,000–$100,000
Debt Service Coverage Ratio (DSCR)
DSCR = $275,000 ÷ $100,000 ≈ 2.75x
Coverage is strong and provides a meaningful buffer against moderate revenue fluctuations.
This level of coverage supports the use of leverage while maintaining financial flexibility.
Operational Risk Factors
• Dependence on licensed electricians
• Labor recruitment and retention risk
• Local market competition
• Service quality and reputation sensitivity
However:
• Revenue is diversified across many customers
• No material customer concentration
• Owner is not the primary technician
• Team-based execution improves transferability
Upside Potential
• Expansion of small commercial contracts
• Addition of service vehicles to increase capacity
• Development of maintenance agreements
• Improved local marketing and referral systems
Upside is operationally driven rather than dependent on structural changes.
Downside Stress Scenario (Revenue Decline 15%)
Adjusted SDE ≈ $230,000
Revised DSCR:
$230,000 ÷ $100,000 ≈ 2.30x
Coverage remains above comfortable lending thresholds.
Business remains capable of servicing debt under moderate stress conditions.
Capital Structure Assessment
Capital structure is supported by strong cash flow relative to debt obligations.
Leverage is reasonable given earnings stability and service-based demand.
Low capital intensity and predictable service revenue support durability.
BAM Risk Profile
Earnings Stability: Moderate to Strong
Capital Structure Strength: Strong
Operational Exposure: Moderate
Revenue Volatility Sensitivity: Low to Moderate
Overall Risk Tier: Low
Investment Thesis
This acquisition represents a disciplined, service-based opportunity supported by recurring demand, diversified revenue, and strong debt coverage.
While labor dependency introduces operational considerations, the team-based structure and absence of owner-operator concentration improve transferability.
The combination of reasonable valuation, strong DSCR, and essential service positioning supports a Low Risk classification within the BAM framework.
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